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Wealth managers stall action on inactive super accounts

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Some wealth managers drawing fees from superannuation life insurance policies on inactive accounts are disputing regulatory guidance from the Australian Prudential Regulation Authority (APRA) that such accounts need to be either confirmed or cancelled by members.

According to media reports, NetWealth Investments wrote to customers with “fixed-term” insurance policies, saying legislation to end life insurance on inactive accounts won’t affect their cover.

Inactive accounts are those that have not received a contribution or rollover in 16 months.

NetWealth says all life policies it holds are fixed-term, and thus unaffected by the legislation.

However, this contradicts APRA regulatory guidance to the industry, which states that group life policies should not be considered fixed-term cover, considering the intent of the policy.

Exemptions to the law for fixed-term contracts should apply only in limited circumstances, APRA says.

Industry Super Australia has criticised the laws for providing exemptions for grandfathered trail commissions in certain circumstances.